“Hopelessly confusing and opaque” The Value of Testing Your Systems

Last month Kona Impact ordered some expensive equipment from a large, very well known copier company. We received an invoice and were happy to see that we could pay online. We would not have to write a check, prepare an envelope and hope that it got from here to there. Having just received a payment made from a customer that took two months to go across town via USPS, we’re happy to pay online whenever we could.

First, I had to make an account. Then I had to confirm my email address. So far so good. Then I had to find where to pay the invoice. I looked and looked. Maybe it was under “Account” Nope. Maybe it was under “Order”. Nope. I spent over 20 minutes looking under every menu to see where I could pay a several thousand dollar invoice. I gave up. I wrote a check and put it in an envelope, knowing that it could take a week or more to arrive.

My question to the company is this: Has anyone in management, customer support or accounts payable tested or used your website?

confused concept

This should be fundamental for anyone who has a website. Go on the website and try to do everything your customer would conceivably try to do.

If you have an e-commerce website, place an order, beginning to end, at least twice a year. Is the process smooth? Are there places where you could make the process clearer and simpler for your customers?

Review all the text on your website at least twice a year. Is it comprehensive? Is it still applicable? Are you missing anything new? Does it read well?

If there is a contact form on your website, try it at least twice a year. Do it work as intended?

You should also have someone who has not used the website place test orders, search for key information and make contact through the website.
I did reply to the copier company reply to the invoice email and simply said that I had to mail the check because, despite great effort, their online payment system did not work for me. I couldn’t come up with anything better than, “I tried to pay online but your system was hopelessly confusing and opaque.”  I would strongly encourage the Accounts Payable department to spend some time trying to use their own system because if they did, they could work on making it clear and transparent.

Testing a website should be a regularly scheduled task. You don’t know what you don’t know, and only through testing will you figure it out.

Lessons Learned from the Grumpy Barber

I found out yesterday that my local barber is leaving the island soon. I’ll miss him as much for his excellent haircuts as his grumpy, opinionated personality. Even though I could have easily labeled him as rude, out-of-place, and genuinely disagreeable (at times), I challenged myself to look at each haircut as a time to step outside of my routine and enjoy the banter.

I’ve seen him kick people out of his shop for using cell phones, asking (what he thought were) stupid questions and women: they would not do women’s hair. He has many 1-star reviews on Yelp detailing his unique personality. He also has a lot of five-star reviews.

You would think that this would have hurt his business; it didn’t. In fact, I believe it helped his business: a no-nonsense haircut with a side of strong opinions was what made him special, unique. I’ve never been there when there were not at least a few people waiting. He was busy, always busy.

In this time of political correctness and exaggerated outrage over the most trivial matters, I think his barbershop offered a chance to enjoy, at least for 20 minutes, banter and conversation that wasn’t overly filtered. I think that’s part of what drew the mostly older patrons to his shop: guys would get a chance to complain about the world and not be made to feel self-conscious or wrong.

This is a good lesson in branding. If the market is full of homogeneous, cookie-cutter providers, a person or business with a bit of personality can carve out a good niche. There is room for a place that breaks the mold and dares to be different, authentic. I think we are lacking a lot of authenticity in corporate run businesses that teach their employees to “follow the manual” and to avoid any sort of non-prescribed behavior or words in the workplace.

Would I like to work side-by-side with my barber? Heck no! Twenty minutes once a month is enough. Do I enjoy stepping into a world of authentic conversation for a brief time when I get my hair cut? Absolutely.

grumpy barber

How to Develop a Win-Win Relationships with Kona Impact

Here is something most business owners understand to some extent: a solid relationship with a supplier is invaluable, especially in times when many businesses are working near or at capacity. You need your supplier just as much as your suppliers need you.

A little non-secret in the business world is that suppliers turn down business all the time. It might be evident in not receiving return phone calls or emails. Some businesses have better tactics and try to refer the clients they don’t want to deal with to other suppliers. Others just claim “too busy” when new projects come in from disprefered customers. I know one local business that has stopped answering the business phone line altogether.

At Kona Impact we usually do not turn down business from new clients, even if we believe we will make very little from their account. We know businesses grow, and we find helping people at that stage of their company very gratifying.

We have over the years done our best to transition some of our customers to other suppliers, or, to be frank, anywhere but us.

win-win business relationship

How can you develop a win-win relationship with a supplier like Kona Impact?

A big part of the answer is in the question: “develop win-win relationship.” Start with the belief that a supplier must benefit from the relationship, which includes making a reasonable profit, working with clients with an reasonably agreeable personality, getting paid on time and all the other markers of a good client.

Here are some the things you should never do as a customer:

  • Order something for which you don’t have the money to pay
  • Order anything you do not plan to pick up when completed
  • Bad-mouth a previous supplier. If you do it to them, you’ll do it to us. Red flag.
  • Start a project you don’t need finished for a long time. If that’s your intent, be sure to pay a hefty deposit.
  • Use the old, “give me a good price on this, and we’ll give you more business in the future” ploy. Doesn’t work for us; if you won’t let us make money now, you never will.
  • Change the scope of the project without expecting a new, often higher, cost

Here are some thing you should do as a customer:

  • Communicate clearly what you have in mind. If you don’t know, or can’t explain, there is no way we can figure out what you want
  • Ask us for a price quote right away. We’ll have some questions, for sure, but don’t use our time to fish for ideas if we’re unlikely to do business. We’ve been doing this for over 12 years, so we have a good idea what projects will cost and will gladly share that with you.
  • Provide comprehensive feedback for each draft. Take some time and give us all your feedback at once. Trickle-in feedback is very detrimental to achieving a good result. If you have five sisters, six aunties, four uncles and business partner who are giving you feedback, good luck, but when it comes to communicating with us, speak with one voice and only after you gathered all the information you think you need.
  • If you’re going to “disappear” for any extended period of time, let us know and offer to call the project done and settle any remaining amounts for the project. We get it that life and business goals change; just have the curtesy to communicate

Evey business transaction can help to build a productive relationship or create a reasons for the supplier or buyer to start looking for a new partner. It’s a two-way street, and in the best of all possible worlds, results in a lasting, productive win-win relationship for all.

 

 

The Lifetime Value of a Customer as a Marketing Cost Guide

Marketing expenses are often looked at very narrowly: how much did I spend on a promotion, and how much did I make on the promotion? Minus out expenses and you’ll have a very crude measure of how much return you received on your marketing investment.

That narrow focus, however, is not going to give you a complete picture of your marketing costs.

I’ll give a few examples of how to use the lifetime value of a customer analysis to figure out the true value of marketing costs.

Let’s look at a new restaurant opening in town. They spent $5,000 on a combination of print and radio ads to promote their Grand Opening on a Saturday. Their revenue on Saturday is $6,000, of which 10% is profit, so they spent $5,000 to make $600. Ouch.

Now, let’s look at the same data and expand our analysis. Let’s stipulate that the average guest of a new restaurant spends $50 ($10 profit) and will return to the restaurant 5 times in the next year. Some will never return and some will visit more frequently, but let’s assume 5 as an average. That means the value of a new customer is now $250 ($50 profit). If the restaurant adds 100 new customers due to the $5,000 ad spend, the gross sales add to a year’s revenue is $25,000 ($5,000 in profit). If we add a second year of 3 average visits, you’ll add another $15,000 to the top line (revenue) and $3,000 (profit) to the bottom.

Now, add the people that came before and after the grand opening because of the advertising, as well as the word-of-mouth recommendations from the people who ate at your restaurant, and you can see that the $5,000 ad spend might have been a great investment—if you look at the long-term value of customers

lifetime value

One of our favorite analyses is to use pay-per-click data for advertising. Let’s look at tea subscription business. We’ll assume 50% margins on the tea.

We’ll go with $.50 per click for keywords related to your product. In my experience, you can expect about 1 in 25 or even 1 in 50 of the people who visit a good website to make a purchase. So, you’re looking at between $12.50 to $25.00 for a sale. If your average sale is $40, you’d be looking at marketing costs between 31.25% and 62.5%, which means you would make almost nothing or lose money on each sale. Ouch!

But, let’s expand our analysis to look at the lifetime value of customers. For our sake, we’ll limit it to one year. If you have a Tea Society Club and 25% of your new customers purchase a subscription for a package a month at $40, you now have a value of each customer somewhere between $40 and $480 ($40/month for a year). Realistically, you’ll have many people stop their subscription, so go with half the total potential and assume $240, which would translate into $125 profit. Would you trade $25 for $125? Of course.

The 75% of the purchases that did not join the Tea Society are also worth something. Let’s say, on average, they order twice more a year—an additional $80 each, in addition to their first $40: $120, $60 profit. Again, $25 for $60 profit? Yes, in my book.

Unfortunately, my entrepreneurs look at advertising costs very narrowly; what did I spend, and what did I make at that time? That would be the right way to look at things if you are promoting a concert or a limited-availability product. That said if you are trying to win new customers, especially if you have a product that is consumable, taking a broad approach to examining your marketing costs will help you make better decisions.

As a side note, any college student will tell you they are inundated with offers for credit cards. They might receive 5-10 solicitations a week. Why would a bank spend so much to win a customer that has little credit history, few assets, and a limited income? The answer is simple: people seldom change credit cards, so the lifetime value of a credit card customer is huge. It’s very worthwhile to spend a lot on these young, future high earning students.

What to do when your web designer leaves town

We get this call three or four times a year:

  • Caller: Can you get my website back online?
  • Kona Impact: Maybe, do you have website hosting?
  • Caller: I don’t know. My web designer left town and she took care of it. It’s not online now.
  • Kona Impact: Can you contact her?
  • Caller: No, she moved to Colorado, I think. Her website is off, too.

Unfortunately, there is not much we can do to help at that stage. If you don’t have a backup of the website, the original designer is gone, and the server on which the website resided is no longer hosting your website, there is little we can do to help.

There are a few things you can do to ensure that you don’t find your website offline when your web designer leaves town.

  1. Ask for a backup of your website when it is completed. The files probably won’t mean much to you, but a competent techie guy or gal could easily re-establish website hosting from a proper backup.
  2. If your web designer made your logo, ask for the following file types: Adobe Illustrator, Encapsulated PostScript, Adobe PDF, Jpeg, and Png. The Illustrator and EPS files (and perhaps the PDF) are editable files if you have the proper software. This will allow you to change your logo, resize it and manipulate it for various uses.
  3. Ask your web designer where your website is hosted and who controls the billing and administration of that account. If your web designer has your website hosting under her hosting plan, you will not be able to maintain the billing and hosting for the website. Seriously consider asking your web designer to move your website to a hosting account you control.
  4. If #3 is not possible, ask for full access to the website, including all logins and passwords.
  5. Make sure you have a way to continue paying for the hosting charges.

If your website is old and not optimal for your needs, consider making a new one. This is a perfect time to start anew and get the online presence you have always wanted.

At Kona Impact, we have been designing and hosting our clients’ websites for over 12 years. We do realize that our clients’ websites are very important to their businesses. As such, we have a firm commitment to ensuring that our clients’ websites are online 24/7. We keep cloud, onsite and offsite backups of websites, and have a plan to ensure that any business disruption will not result in issues for our clients.

We Serve Everyone….Except…

There have been a few stories in the media recently about businesses refusing services to people they don’t like. One news story was about a  cake baker in Colorado who won a favorable ruling in the Supreme Court, giving him the right not to make a cake for a wedding for two gay men. Another story in the news was about the spokesperson for President Trump being asked to leave an upscale restaurant because the staff/owner did not like some things about Trump.

My reaction as a business owner is, fine, ok, we have a right to serve who we want, though not serving someone because of race or other protected statuses will get you into a boatload of trouble (as it should).

Every business has customers or clients who are not welcome in the store or on the premises. But, this is almost always due to the behavior of the customer and usually (I would hope) not about one’s race, gender, sexuality or political affiliation.

Kona Impact has made things for the Tea Party (a far-right group) and Occupy Kona (a far left group). We have had atheist, Muslim, Jewish, Jehovah Witness, Mormon, Evangelical, Conservative Christian and Liberal Christian customers. We have several gay customers. We have done projects for an “adult” retailer in Kona, as well as projects for bars and CBD businesses.

We have turned down two businesses–an “escort” and pitbull breeder that breeds fighting dogs–in the past 12 years for the same reason: these businesses are illegal and, truth-be-told they, not the kind of business I could honestly put my full effort and energy into.

My thinking is simple: if a person comes to us for services, I do not care about the circumstances of that person’s life or business. I don’t care if he or she has beliefs or a lifestyle different from mine; I just want to give them the best possible product or service and get paid. If I refused a customer based on who he or she is, I am 100% certain I will not change that person and he or she will find another provider. I will have gained nothing.

I know that the baker in Colorado felt his moral, religious, opposition to gay marriage was a good reason to deny service to the gay couple. This is fine; he can serve who he likes (though he should not expect to be welcomed in his community with such bigoted views). I would not patronize an establishment I knew to have such policies. Likewise, I would avoid the restaurant that rejected the Trump staffer. That is my choice.

I do tend to look at business as business. I am not trying to change the world by selectively serving customers based on who they are. I will, and have, refused clients based on their behavior. Rude or disrespectful to my staff or me? Adios! Pay invoices late and only after great effort on my part? Find a new provider! Gay, Jewish, Occupy Kona member who sells CBDs? My door is open!

Non-Profit Does Not Mean No Money

I was talking to a graphic designer the other day about a project she had recently completed. She said, “I won’t charge them much. They are a non-profit.” Curious, I asked her what she thought the budget of the non-profit is. She had no idea that the budget of the agency was, from what I have heard, about 6 million dollars a year.

After talking with her a little more, I realized that she is a very kind-hearted person and felt that by charging the agency less, she’d be helping them with their mission. I could understand that, and, indeed, Kona Impact has often given services and products to local non-profits as a way to support their mission. I feel it’s part of our responsibility to support the community in which we live.

It’s important to look at non-profits through the lens of a business person, though. Some, like a small community outreach programs for homeless youth, might have a budget in the thousands, so any contributions of time or services would be much appreciated. Any money not spent would likely go to supporting community projects. These are great organizations to do pro bono work for, especially if you are new to the design business and you want to build your portfolio.

At the other end of the spectrum is non-profits supported by government grants or large foundations. This typically includes medical services non-profits, which are funded by insurance payments and Medicare, animal services, which receive state and county support in many communities, and many social service non-profits, which often receive federal and state funds. These have many full-time staff members and directors who are all reasonably compensated. They are professionally run and have a budget for outside services.

I wryly told the graphic designer that she is probably the only person who is not making sufficient money when she does work for the agency. All the staff and other suppliers are making a reasonable salary or profit, and she should consider doing the same. She could then be compensated fairly for her work and then, if she chooses, donate time or money to other nonprofits with lesser funding or resources.

Many years ago, Kona Impact decided to support a few non-profits that we knew had little funding. They also had to be organizations with a mission in which we believe. Currently, we donate a lot of products and services to the Aloha Theater, a youth sports organization, Rotary International, and our local Rotary club. We give generously to these organizations. We also try to give heavily discounted rates for other organizations that do good in our community, but we do run a business, so if our buyer is a large, well-funded organization, we do like to make some money on the jobs we do.

Just say “No” to increasing the General Excise Tax on Hawaii Island

The General Excise Tax (GE Tax) is a tax on the gross sales of a business. Currently, it is 4.166% for Hawaii Island businesses and an additional half a percent higher on Oahu. There are very few exceptions: it is collected on basically all goods and services including clothes, food, rent, automobiles sales and just about everything else. It is a very broad tax.

Recently Mayor Kim has floated the idea of adding a half percent to the tax, which would be restricted to in use road projects. He would then reallocate the funds that he had budgeted for roads for other County of Hawaii services. This is will grow the county budget 6-9%.

It is a bad idea…a very bad idea.

It’s bad for businesses

Let’s assume a business is a perfect monopoly; that is, they have 100% complete control over their sector of the economy. There is no competition. Adding a half percent to the GE tax would result in a direct pass through to the buyer/consumer of .5%. The consumer pays more, but the business would, in theory, suffer little, as buyers have no choice. They could, though, consume less if the prices become prohibitive. The power company, HELCO, is the only company I know that has no competition—a perfect monopoly.

I think this is the model Mayor Kim has in mind: businesses on the island are perfect monopolies.  Increasing taxes won’t hurt businesses that much because we don’t have much choice. Tourists will come regardless of prices and local businesses will not suffer because they will just pass on the tax to consumers and other businesses.

This is where our mayor’s incomplete understanding of business shows.

Every business, with few exceptions, competes globally. The small shop that sells souvenirs likely buys the products from a distributor in Oahu that collects and pays the GE tax when it is sold to her store. The owner then collects and pays the GE tax when she sells the items. At some point, the cost of item becomes prohibitive and Hawaii becomes prohibitively expensive to visit. Restaurants, hotels, vacation rentals, taxis, tour providers and so on will all suffer when increased taxes make them too expensive for travelers. That’s the tourism sector.

Now let’s look at any business that retails items to individuals or businesses that live here. Add a half percent increase in the price of nearly ALL goods and services and life here becomes more expensive.

What has been the biggest trend in consumer behavior the past ten years? Buying online. When goods and services become too expensive in Hawaii, people will buy off-island. This has already had a huge impact on the ability of many businesses to survive and will only become more pronounced with an increase in the GE tax. Businesses will go out of business and consumers will have less ability to keep their money on the island by buying local. Almost every business competes globally–from a small fabric store to our vacation activities providers. Become too expensive, and people will look elsewhere.

It’s bad, really bad, for low-income residents.

Let’s also take a look at consumers. Poor and lower-middle class families have no choice to spend the majority of their income on basic consumer products like bread, milk, clothes, and rent. Many of these people are living paycheck to paycheck, so it’s going to have the biggest impact on them. They might spend 95% of their income on necessities; whereas, a wealthy person might only spend 30% on necessities. Another .5% is a lot when you’re living with no disposable income. This is what they mean when they say the GE tax is high regressive: it places a bigger burden on the poor than the wealthy.   

So, what’s the solution?

To me, it seems to be abundantly clear: cut or reallocate spending. That is, live within our means.

If the public is clamoring for new and better roads, we should find ways to cut other parts of the budget. Our economy and all the associated taxes – real estate, gasoline, vehicle registration – are adding millions a year to our County’s coffers, and this trend will continue. Hold expenses where they are, and there will be many millions of dollars added to the County’s budget every year. This is inevitable if the other taxes are unchanged. We can simply grow our revenue keeping rates as they are, as the increase in property values and the growth in our island population and tourism will, over time, provide millions of dollars of extra revenue.

We can do what every family does–set aside money over time and save up the money for big projects. We can make priorities. As a consumer and business owner, I appeal to our leaders to exercise fiscal restraint.

New Entrance at Kona Impact Headquarters

We recently installed a large display on the entrance to our office. Previously, we had a nice blue entrance; this time we decided to go for green. The material is see-through, so from the inside of our office, you can see out clearly. From the exterior, you can see the graphic, but not the inside of our office.

see through vinyl

Immigrant and Non-Native English Speaker Clients

Last week we started several new projects, and nearly a third were projects for people who speak English as a second language. All grew up outside of the United States and were now running businesses on Hawaii Island.

This is not unusual: a large number of our clients fit the profile of immigrant, non-native speakers of English. Many of these new clients come to us from referrals and almost all visit or call at least once before starting a project, so I feel we’re doing something right.

When I started Kona Impact 12 years ago, I looked at the skills and ways of doing business that would attract a wide variety of clients. I had lived abroad for most of my adult life, so I knew this could be an asset: I was a good listener, and I could communicate clearly to those who didn’t speak English fluently. I was for many years what my many of my clients are: living in a new culture and speaking a new language, at times not very fluently.

I greatly enjoy talking to clients from different countries. In the past week, I’ve worked with people from China, the Marshall Islands, Korea, France, French-speaking Canada, Mexico, and Germany. I enjoy the focus and hard work these people put into their businesses. It’s not easy, I know, and if you add the challenges of language and unfamiliar laws, it can be even more difficult.

Here a list of things I keep in mind when dealing with non-native English speakers:

1. Many are highly-educated and accomplished, often holding advanced degrees. I always assume they are intelligent, hard-working people, even if their English might be limited or imperfect.

2. They are highly motivated to provide for their families and achieve their version of the American Dream. I seldom see anyone who works harder than an immigrant.

3. Listening (on my part) is the most important skill I can have when speaking with someone who is speaking in their second language. Take time. Don’t interrupt. Allow for a slower conversation speed.

4. Provide what they may be lacking. Many immigrants may not know some of the laws that they will need to follow. Insights into the Hawaii business culture are often appreciated. Give them the best information you have, even if it might contradict their understanding. Be honest and forthright 100% of the time.

5. Connect them to resources. If I see a person is about to start a business and they don’t have it registered, and they don’t have a tax license, I show them where to do that. Over the years, I have developed a large network of friends and clients. If I know of someone a new client might benefit from meeting, I’ll often share contact information. I believe that businesses need a network to succeed.

6. Understand that they may have different approaches to payment and negotiation. Some of my clients come from countries where it is customary to negotiate most prices. I understand that and try to work with them, which usually results in a nominal discount in the project cost.

7. Above all, treat them with dignity and respect and show appreciation for their business. These are universals in business, but perhaps a bit more critical for someone who might be apprehensive and a bit wary of people taking advantage of them

I hope that in the future Kona Impact will continue to be a place that attracts a wide variety of clients from around the world. We look at these clients as an important part of our business and do enjoy helping them achieve their business goals.